Recent policy initiatives in the EU aim at supporting so-called Young Innovative Companies (YICs). This paper provides empirical evidence from German CIS data on the innovative performances of this specific type of firms, supporting why they matter. We first characterize YICs in the sample of innovation active firms. We show that firms that combine newness, smallness and high R&amp;amp;D intensity, are rare in the sample of innovative firms, but achieve significantly higher innovative sales than other innovative firms, especially innovative sales that are new to the market. Not surprisingly, YICs view financial constraints, both internal and external, as an important factor hampering their innovation activities, significantly more so than other innovation active firms. This access to finance problem is an often used motive for government intervention. In Germany, subsidies schemes for innovation are general and not particularly targeted at YICs. When assessing the effectiveness of these public funding schemes for our sample firms, we find that they are not effective to increase the innovative sales of YICs, unlike the average innovative firm in our sample.

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The Greenland infrastructure for the airborne traffic uses Kangerlussuaq, Søndre Strømfjord, as hub. New scenarios may change that, and one possibility is the construction of a large airport at Nuuk with a 3000 m runway. The trunk line will then be between Copenhagen and Nuuk. In that case the village Kangerlussuaq will be abandoned. The paper analyses the size of the economic gain to Greenland of such a change. Using official statistics and information collected for the investigation a description is made of the employment structure and the income earned in the trades represented in Kangerlussuaq. It is then discussed to which extent people do tasks that will still be needed with the new structure and to which extent they will be set free to go into alternative production. The last possibility is regarded as a saving or as an increase in resources for Greenland, and the estimate is that this gain will amount to around 40 percent of the contribution to GDP in Kangerlussuaq. The saving is modified a little by the need of some new investments in Nuuk, mostly for housing.

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Welfare ranking of policy instruments is addressed in a two-sector Ramsey model with monopoly pricing in one sector as the only distortion. When government spending is restricted, i.e. when a government is unable or unwilling to finance the required costs for implementing the optimum policy, subsidies that directly affect investment incentives may generate higher welfare effects than the direct instrument, which is a production subsidy. The driving mechanism is that an investment subsidy may be more cost effective than the direct instrument;
and that the relative welfare gain from cost effectiveness can
exceed the welfare loss from introducing new distortions. Moreover, it is found that the investment subsidy is gradually phased out of the welfare maximizing policy, which may be a policy combining the two subsidies, when the level of government spending is increased.
Keywords: welfare ranking, indirect and direct policy instruments, restricted government spending
JEL: E61, O21, O41

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In most countries labor is organzed in cooperating skill-speci c unions rather than in industrial unions or separately bargaining skill-speci c unions. Within an extremely simple model of a small open economy facing imperfect competition we show that this way of organizing labor can be explained as the outcome of rational (optimizing) behavior on the part of the unions and the employers. Organizing labor in local industrial cartels (regardless of skill) or a single economy wide cartel results in a real wage level that is inappropriately low both from the point of view of labor and the society as a whole unless labor has close to monopoly power in the wage setting process. Organizing labor in local or economy wide skill-speci c unions may result in a wage level that is too high. In addition, a labor market organized in non-cooperating unions is likely to be unstable. This dilemma calls for a compromise: A cartel of cooperating, independent skill-speci c unions. The degree and the form of the cooperation depend inter alia on the bargaining power of the employer, the number of skills and competing rms and the rigidity with which the unions enforce lines of demarcations.

We use a natural experiment to investigate the impact of participation
constraints on individuals' decisions to invest in the stock market. Unexpected inheritance
due to sudden deaths results in exogenous variation in financial wealth and allows us to
examine whether fixed entry and ongoing participation costs cause non-participation. We
have three key findings. First, windfall wealth has a positive effect on participation.
Second, the majority of households do not react to sizeable windfalls by entering the
stock market, but hold on to substantial safe assets—even over longer horizons. Third,
the majority of households inheriting stock holdings actively sell the entire portfolio.
Overall, these findings suggest that participation by many individuals is unlikely to be
constrained by financial participation costs.

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Why do donor countries give foreign aid? The answers found in the literature are:
(i) because donor countries care for recipient countries (e.g. altruism), and/or (ii)
because there exist distortions that make the indirect gains from foreign aid (e.g.
terms of trade effects) to be larger than the direct losses. This paper proposes a
third answer to the above question, namely that aid is determined through the
domestic political process of the donor country. The paper demonstrates how
foreign aid affects the donor country’s income distribution and how, in a direct
democracy, the majority of voters might benefit from foreign aid giving even
though the country’s social welfare is reduced.
JEL Classification: F35
Keywords: foreign aid, politics, majority voting.

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Price-earnings ratios are part of the toolkit that is used for assessing the valuation of
individual firms on the stock market as well as the entire market itself. This paper
presents consistent P/E series for the liquid Danish shares adjusted for share buybacks.
The results show that over the period from 1969 to 2003, the average (trailing)
P/E equals 13.5. The P/E reaches its lowest level in 1980, which is likely to be due to
a soaring oil price, high wage increases and interest rates approaching 20 percent.
Notwithstanding optimistic equity pricing also in Denmark in the late 1990s, the
upturn in Danish valuations was more moderate than in the US. The correction that
sets in subsequently reversed essentially the gains in the Danish P/E in the 1990s.

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Separating the Impact of Dual Class Shares, Pyramids and Cross-ownership on Firm Value Across Legal Regimes in Western Europe

Bennedsen, Morten; Meisner Nielsen, Kasper(København, 2005)

[Flere oplysninger]

[Færre oplysninger]

Resume:

Recent policy initiatives within the harmonization of European company laws have promoted a so-called "principle of proportionality" through proposals that regulate mechanisms opposing a proportional distribution of ownership and control. We scrutinize the foundation for these initiatives by analyzing the use of instruments to separate ownership from control across legal regimes in a sample of over 4,000 publicly traded firms from 14 Western European countries. First, we confirm the negative impact on firm value from disproportional ownership structures previously established in a sample of Asian firms by Claessens et al. (2002). Second, we show that dual class shares have a larger and more significant negative effect on firm value than pyramids and cross holdings. Third, we find that the impact of disproportionality and the underlying instruments is inversely related to the level of investor protection. Thus, dual class shares and pyramids substitute legal protection in countries with inadequate investor protection. Fourth, we find no evidence of a significant effect of disproportionality instruments on earnings performance. Finally, we discuss policy implications of these findings in relationship to the process of harmonization of the European capital markets.
JEL classifications: G30, G32, G34 and G38
Keywords: Ownership Structure, Dual Class Shares, Pyramids, EU company
laws.

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Abstract:
The balance of payments of Greenland has special features due to an important current transfer,
bloktilskud, from Denmark. The trade balance does not exhibit a deficit of this order of magnitude
but comparison of the bloktilskud and the deficit is difficult as official figures are available for the
merchandise trade only. Figures for services are missing. However, guesses about the size of a
deficit in the services’ trade do not easily discard the impression of a large surplus on the current
account. Over a ten year period it is suggested that accumulated surpluses could be twice the level
of Greenland’s GDP. This seems unlikely, but the available data raise a puzzle that ought to be
addressed as it nourishes suspicion of unobserved accumulation of wealth.

The role of product and marketing innovation for productivity growth is addressed using survey and register data for the Danish economy. It is argued that marketing and product innovation are complementary inputs and that innovation activities are skill-intensive. It is found that product and marketing innovation in skill-intensive firms results in significantly faster productivity growth than in unskilled-intensive firms that introduce this combination of innovation activities.
More precisely, an increase in the share of educated workers of one percentage point, increases productivity growth by around 0.1 percentage point in firms with product and marketing innovation. In addition, it is found that firms that engage in product innovation but not in marketing innovation or the other way around do not demonstrate a growth effect from their innovation activities. It is also found that product and marketing innovation has an independent
role in productivity growth that cannot be attributed to organisational changes, even though the majority of innovative firms engage in this latter innovation type.

In this paper, we set up a two-country general equilibrium model
where trade unions have wage bargaining power. We show that a
decrease in trade distortions inducing further product market integration
gives rise to specialization gains as well as a labour market reform
effect. The implications of the specialization gains are similar to an
increase in labour productivity, whereas the labour market reform effect
is similar to an increase in the degree of competition in the labour
market. Wages, employment and welfare increase as a result of further
product market integration. It is interesting to note that the labour
market reform effect of product market integration is achieved despite
an increase in the wage level.
JEL Classification: F15, J30, J50.
Keywords: Trade frictions, wage formation, employment, welfare
gains.

Product Market Integration, Comparative Advantages and
Labour Market Performance*
In a two-country model with trade driven by comparative advantages, it is considered how
imperfectly competitive labour markets are affected by lower frictions in international goods
trade. Easier goods trading is equivalent to increased mobility of employment across
countries and thus a change in the trade-off between wages and employment faced by wage
setters. While the effects of product market integration on the trade-off between wages and
employment in general is ambiguous, it is shown that product market integration works like a
general improvement in productivity via the specialization it allows through trade.
Unambiguously, real wages and employment and welfare improve upon reductions in trade
frictions, and therefore workers are better off irrespective of whether the market power of
unions is enhanced or muted.
JEL Classification: F15, J30, J50
Keywords: trade frictions, wage formation, employment, welfare gains

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We consider a model of commercial television market, where private broadcasters coexist with a public television broadcaster. Assuming that the public TV station follows a policy of Ramsey pricing whereas the private stations are profit maximizers, we consider the equilibria in this market and compare with a situation where the public station is privatized and acts as another private TV broadcaster. A closer scrutiny of the market for commercial television leads to a distinction between target rating points, which are the prime unit of account in TV advertising, and net coverage, which is the final goal of advertisers. Working with net coverage as the fundamental concept, we exploit the models of competition between public and private price and quantity in order to show that privatization of the public TV station entails a welfare loss and results in TV advertising becoming more expensive.
Keywords: TV broadcasting, imperfect competition, Ramsey pricing, welfare comparison.
JEL classification: L11, L82, L33